Financial Statistics for the U.S. and the Crisis - What Did They Get Right, What Did They Miss, and How Should They Change?

"Although the instruments and transactions most closely associated with the financial crisis of 2008 and 2009 were novel, the underlying themes that played out in the crisis were familiar from previous episodes: Competitive dynamics resulted in excessive leverage and risk-taking by large, interconnected firms, in heavy reliance on short-term sources of funding to finance long-term and ultimately terribly illiquid positions, and in common exposures being shared by many major financial institutions," according to a Fed paper from Matthew Eichner, Donald Kohn and Michael Palumbo. " In this paper, we describe why we are concerned that specifying this second stage generically and prior to processing the first-stage signals will not be fruitful."